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Private-equity interest in mining companies has waned, leaving a handful of players to pick through the debris.
For two years, private equity was all the rage as the mining industry got hit hard by the plummeting commodity prices. Traditional private-equity firms were looking for distressed assets. Bankers and others tried to establish private-equity shops.
But today, many of the big funds have not made mining investments and others have simply given up.
“They thought they could be passive financial investors, raise some capital, put it in some companies. But it is very difficult to find something where you can actually make money,” said Isser Elishis, chief investment officer with Waterton Global Resource Management.
Globally, private-equity mining deals have slipped. Last year, the private pools of capital were involved in 66 deals worth $5-billion, compared with 83 transactions worth $6.7-billion in 2010, according to data compiled by Thomson Reuters.
In Canada, private equity was involved in 34 mining deals in 2014, roughly the same as in 2010 when commodity prices were climbing, according to the Thomson Reuters data.
Small mining companies, which have come to Toronto for the annual Prospectors and Developers Association of Canada conference, had been hoping private equity would help provide much needed capital.
But that has not happened.
The reality is that the traditional private-equity “buyout” model of buying a distressed company, fixing it and then selling it over a short period of time is harder to pull off in mining, which has a much longer time frame to develop projects.
“About two years ago, everyone was there trying to figure out the best way to play the space,” said Michael Scherb, general partner with London-based Appian Capital Advisory LLP.
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